In a recent interview with Bloomberg Television, publisher of the Gloom, Boom & Doom Report Marc Faber certainly had gloom and doom to say when asked about the direction of U.S. bonds. The good news, however, is he believes equities should benefit (at least in the short term).
See the interview here.
When asked about whether he would choose Spanish or Italian debt over U.S. Treasuries, he said (paraphrased):
I would take the U.S. because they can print themselves out. I would not take them as a good investment because I think you have today a yield on the 10-Year of around 1.7% and on the 30-Year around 3%. I think eventually in the next few years yields will be much higher and the purchasing power of the dollar will have depreciated significantly.
Faber is actually quite bearish about the entire financial system, as he indicates in the interview. However, even in this doomsday scenario, he believes investors are better off in stocks than debt:
Relative to government bonds, equities are attractive. If you really think it through and you are bearish as I am and you think the whole financial system will one day collapse, maybe three years or five years or 10 years, one day there'll be a reset and everything will be essentially started anew. Then you are better off in equities than in government bonds because a lot of government bonds will either default or they will have to print so much money that the purchasing power of money will depreciate very rapidly.
Business section: Investing ideas
So if Faber's doomsday scenario plays out, where should investors be hiding for cover? For ideas, we ran a screen on institutional stock picks paying handsome dividend yields even with recent outperformance.
We screened for stocks paying dividend yields above 2% that are currently up over 20% for the month. We also screened for stocks with the most significant net institutional purchases over the current quarter, indicating that hedge fund managers stand behind these names.
Do you think these stocks could weather a financial meltdown like the one Faber predicts?
List sorted by net institutional purchases as a percent of share float. (Click here to access free, interactive tools to analyze these ideas.)
1. Janus Capital Group
3. Thor Industries
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Institutional data sourced from Fidelity.
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